Travel Stocks Rally on Earnings—More Upside Ahead?

Key Points

• These travel stocks have rallied after beating EPS expectations, though this price action still doesn't price in what could be had in the future.
• Markets inherently think these stocks still have double-digit upside potential, backed by fundamentals.
• Wall Street analysts and institutional buyers reiterate this view through buying and upgrades.

The market is now halfway through the year’s earnings, which is arguably one of the most important seasons of all because it will close in on the possible ranges for the next two quarters and the year-end financials. That being said, many retail and professional investors are beginning to price in their opinions for the companies they find of interest, causing prices to swing all over the place.

Some of this attention has recently landed in the consumer discretionary sector, specifically in travel stocks. The market has discounted this area due to inflation and tariff uncertainties, blurring the future potential paths that these companies can take since they rely so heavily on consumer confidence and behavior.

However, earnings results show a story that justifies higher prices; the only question is whether growth is priced in.

That question will be answered for stocks like Expedia Group Inc. NASDAQ: EXPE, Trip.com Group NASDAQ: TCOM, and even United Airlines Holdings Inc. NASDAQ: UAL as a reasonable basket of travel stocks that are heavily exposed to the current interest for international travel, a boost that comes from specific spending patterns as well as currency exchange fluctuations making overseas destinations more attractive today.

Expedia Stock Has More Left in The Tank

Wall Street expected Expedia to report $4.13 in earnings per share (EPS), a reasonable expectation considering the challenging year that travel and consumer names have had. However, the company came in with a beat of $4.24 in EPS, or roughly 9 cents higher than consensus, to justify a 7.4% rally in just one week, and 14.2% over the month.

This price action reflects not only what happened in the recent quarter, but also the fact that the future could hold a lot more growth to bring the stock into a new, higher ceiling. Wall Street analysts now expect Expedia to report $5.43 in EPS for the third quarter of 2025, a net growth of 28% from today’s earnings figure.

As most investors know, where EPS growth goes, so does the stock price, meaning there is an implied 28% growth potential behind the stock today. This is also where the price-to-growth (PEG) ratio comes into play, as it seeks to gauge whether today’s valuation multiples already reflect the underlying earnings growth.

Any number below 1.0x means growth is not priced in. Expedia now sports a 0.7x PEG, meaning this stock has an effective 30% upside. Fundamentally, this also matches the implied 28% jump in underlying EPS. Hence, it looks like the rally isn’t over for this name.

Trip.com Calls for Premium Multiples

After rallying by 5% in a single week on earnings, investors now face the dilemma of chasing this stock higher or waiting for a pullback (which may never come). The fact that Trip.com delivered 87 cents in EPS while the market expected only 65 cents should answer that question immediately.

However, this is now in the rearview mirror, and it’s time to look to the road ahead and figure out what this company's true potential is. A good place to start would be to gauge what Wall Street analysts are thinking, especially now that the company has beaten EPS expectations.

The consensus view for Trip.com stock is a Buy rating, and a valuation of $77.3 per share to call for roughly 25% upside potential from where it trades today. With double-digit upside accumulating in this industry, it makes sense to see 6.4% of Trip.com’s short interest decline over the past month as an initial sign of bearish capitulation.

More than that, Trip.com’s exposure to international bookings earned it a premium valuation multiple in terms of price-to-sales (P/S) of 5.5x compared to the rest of the leisure industry’s average 2.7x valuation. There’s a reason the market is willing to overpay for the future sales of this company, and now investors know what that reason is.

United Airlines Hasn’t Priced in Growth Yet

Some may think a one-week rally of 12% in United Airlines stock should be sold and locked in, but that is wrong. Going back to the PEG ratio logic, this stock still has much more upside potential to be filled in the coming months, especially now that its exposure to international flights allows it to ride on this new consumer wave.

After reporting $3.87 in EPS (above the $3.81 consensus), the stock has earned its place in a watchlist, and if already in a portfolio, it has earned its right to stay there. The reason is that a PEG ratio of only 0.4x fundamentally implies 60% upside potential in this stock.

Now, airlines typically don’t move much in a year. Still, they aren’t known for 12% rallies in a week, like United Airlines just experienced, which might explain why those at the Vanguard Group increased their holdings in United Airlines stock as of early August 2025.

A 1% boost doesn’t sound like much in percentage terms. Still, in dollar terms, it means these institutional buyers now hold a stake worth $2.9 billion in this airline, or 11.5% ownership in the entire company, to act as a vote of confidence and confirmation that the future upside potential is very much present today.